The Order Book can be grouped into blocks based on the asset. To trade like a pro, you need to learn to classify your reading into three zoom levels:
1. Micro View (Max detail)
This is the default view, showing all available decimals.
What it shows you: The speed of the order flow in milliseconds.
What we're looking for here: Suffering an anxiety attack; best not to look at this 😅
2. Medium View (Operational summary)
Here we group decimals for a cleaner view.
What it shows you: A summarized reading of the movements.
What we're looking for here: Liquidity gaps.
3. Macro View (Institutional levels)
We group the book into round numbers. It’s the cleanest snapshot of the market.
What it shows you: Massive orders concentrated at significant levels.
What we're looking for here: Institutional level supports and resistances.
The Order Book is also the favorite of algorithms for inducing errors. Here are three tactics they use to make you lose:
1. Iceberg Orders: Like an iceberg, they only show you the tip 😮. The algorithm splits a gigantic institutional order into small parts. In the book, you only see a harmless order, but as the market consumes it, it automatically reloads over and over, raising an unexpected and massive candlestick.
2. Spoofing (Phantom Orders): They set up a gigantic wall with the sole intention of scaring you. You see that wall, panic, and sell. Just before the price touches that wall, the order magically cancels. There was no intention to buy; they just wanted your liquidity.
3. Flipping: A huge buy order comes in, shooting the price up. You get excited and buy high, thinking it will go up more, and in a blink, that same liquidity flips and turns into a massive sell order, bringing the price back down to where it was.
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